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Treasury still crunching numbers for nuclear

Apr 02 2017 13:36
Lameez Omarjee

Johannesburg - Even though Eskom is the procurer of the nuclear build programme, if the power utility defaults on its debt, it will still be Treasury’s responsibility to foot the bill, according Directory-General Lungisa Fuzile.

Fuzile was speaking at a press briefing on Saturday, along with newly appointed Finance Minister Malusi Gigaba and his deputy Sfiso Buthelezi. He was responding to a question about the funding of the nuclear build programme.

This is in light of the fact that there was no allocation made to nuclear in the National Budget delivered by former Finance Minister Pravin Gordhan in February.

READ: Why Gordhan’s silence on the nuclear option is a good sign

“We need energy and as part of the mix, it is likely we will have nuclear. And if and when we buy it, we can only buy it at a pace and scale that we can afford,” he said.

Fuzile said that it was only logical to consider the size of the GDP, as well as the revenue generated from it, as well as Eskom’s balance sheet, when it comes to choosing an affordable option.

He explained that with Eskom becoming the procurer in December last year, the allocation to the Department of Energy (DoE), the initial procurer, had subsequently fallen away. “The disappearance of allocation of nuclear from the budget is not a mystery.”

At the time the DoE was the procurer, it required capacity to handle the programme, which is why R200m was allocated from Treasury. “They were allocated money to do all of that because they needed the capacity to do that.”

However, Eskom is wholly-owned by the sovereign, Fuzile pointed out. “It borrows largely on the back of the sovereign, so the sovereign is right at the ‘front and centre’ of procurement so the affordability issue cannot be independently determined by Eskom alone.”

He added: “If theoretically, they were to overcommit themselves and unable to service the debt, it becomes government’s business.” How Eskom borrows and how it finances that debt is still very much government’s concern, he explained.

Gigaba shared these views, and said that the nuclear build programme would implemented at a “pace and scale” the country can afford.

ALSO READ: Transparency, people's trust needed for SA nuclear – expert

Experts on nuclear power have previously shared with Fin24 the importance of transparency in tender processes to ensure that the most affordable option is chosen.

At the Nuclear Africa 2017 conference held last week, Eskom chief nuclear officer Dave Nicholls explained that the cost of nuclear depends highly on who the successful bidder is. The first two units  are expected to average 4000 US dollars per kilowatt hours.

Tim Yeo, former British politician and chair of New Nuclear Watch Europe (NNWE) told Fin24 that transparency throughout the process would ensure trust from people, who will most likely support it. 

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